Leadership and management experiences from the manufacturing world.

15 May 2009

It’s about time! For years now the healthcare industry in the US has been suffering form a sub-competitive market. Demand for services, medicine, doctors, cures… and the list goes on… has far outpaced the availability of these, and in consequence has led to yearly price increases which double or triple the rate of inflation.

Now, I’m not saying that I agree with the new administration’s ‘socialization’ approach, however, the fact that over regulation has made it nearly impossible for new players to enter the market, and forcing family doctors, who will spend most of their lives prescribing Tylenol and antibiotics, to spend 8 years in school just to do that, it’s about time government take a new approach to make these services, not only more affordable, but more abundant.

Needless to say, whether government starts regulating costs or they open the gates to allow greater competition, the current players will have to find new ways to keep their bottom lines healthy. Not only at the research level, but at the operational level these companies and service providers will have to get better in light of the new rules that will likely impact the industry.

The ‘medicine’ that these players will need heavy doses of will be “innovation”. However, this innovation will have to come with different rules governing the market. The lack of competition has allowed these players to forget what the words ‘frugal’ and ‘efficient’ mean. The entire system will be under cost pressure to meet the new reality, and they will no longer be able to throw unlimited amounts of money and resources to “find the cure”.

All processes in this supply chain will need scrutiny and most providers will come to realize that not only the ideas from their scientists and doctors will have to be taken into account, but the ideas from the nurses, bill collectors, shop floor operators, call centers, ER staff, insurance companies, orderlies, and perhaps even the customers will need to be considered and addressed.

2 comments:

Your statement "... lack of competition..." about the healthcare industry (social program, actually) says it all. Regulation, and government in general, is antithetical to choice and the concept of a "market." Competition is the natural result of free choice and a genuinely democratic society.

Innovation requires the elevation of value, which cannot occur through an entropic process; energy, whether intellectual or physical, must be input to the system to elevate value to a higher level. That energy is the response to healthy competitive survival pressures.

Unfortunately, given the presence of an innovation-squelching FDA, an AMA to monopolize the profession, and government-connected companies living off Medicare and throwing money at DC to keep things that way, healthcare is more of a Fascist realm than a bona fide industry.

Great post. Thank you for sharing. I certainly echo your observations. I also can't say I agree with socialization of healthcare but I do believe that has inadvertently expose the serious lack of incentives to promote innovation in the healtcare industry. It often reminds me where the banking industry was 10 years ago, plagued by inefficient manual efforts and antiquated systems that could not keep up with the evolving customer needs and the sophistication of credit risk.

We live in a data driven world where technology enables us to measure and compare everything. Thanks to competition, patients now have access to more choices and are able make informed desitions when selecting the best quality of care.

This means that healthcare providers have to put a value based - patient centric approach to their business to remain competitive, and leverage new technologies (like the Cloud, Big Data, Analytics) to better manage costs and drive innovation.